Yahoo Japan is the largest internet portal operator in Japan. Recently, it created a controversy by refusing to follow Yahoo Inc.’s lead in choosing Microsoft as their partner. Instead, they will be using Google’s search engine instead. They will also adopt Google’s search-linked advertisement delivery system and feed its data to Google sites. In return they will provide US Company its auction and shopping sites data.

Yahoo Inc. owns one-third of Yahoo Japan and it is the second largest shareholder next to Softbank Corp. Yahoo Inc.  also tried to partner with Google for search engine before they went with Microsoft but the deal was blocked by the US government.

Yahoo Japan’s recent move was seen by others as an emphasis of “Microsoft’s weakness” in search engine compared to Google. But Yahoo Japan believes that this decision will make them stay on top of the domestic market.

Mitsushige Akino, Chief Fund Manager at Ichiyoshi Investment Management stated that, “If this Yahoo Japan and Google partnership works well, other search engine and portal site players all over the world may start adopting Google’s technology.”

In addition, the Yahoo Japan President cited during the news conference that after a thorough investigation, the company concluded that Microsoft’s technology was not strong enough to compensate for its needs; one example was their sub-part Japanese language search capability.

Yahoo Japan still assured Yahoo Inc. that they will remain to be their strategic partner for Japanese portal site. and the U.S. Company will maintain its stake. They will still use the Yahoo brand as well and this move will not change the company’s relationship with Yahoo Inc.

Although Yahoo Japan confirmed with the Japanese government that their partnership with Google will not violate the anti-trust regulations, Microsoft is seeking legality for Yahoo-Google tie up. Microsoft Corporation’s general counsel stated that, “This agreement is even more anti-competitive than Google’s deal with Yahoo in the United States and Canada that the Department of Justice found to be illegal.” “(That) deal would have locked up to 90 percent of paid advertising. This deal gives Google virtually 100 percent of all searches in Japan both paid and unpaid. It means there will be no search competition in Japan and that Google will end up controlling all personal search information for all Japanese consumers and businesses.”

If this deal will materialize, Yahoo Japan’s switch to Google search engine will take effect not later than this year.